Online Retail Can’t Rely On Low, Low Prices Anymore

Common sense isn’t so common when retail is still experiencing its fair share of upheavals from each new disruptor to make it to market, but the decade-plus of online and in-store retail operating side by side has established a few new ground rules that almost everyone can agree on. Brick-and-mortar joints usually have the upper hand on customer service, while online merchants outperform in selection and personalization.

It’s the new lay of the retail land — or so it seems. According to a new study, online retail monopoly on the lowest prices in town may be eroding faster than anyone thought possible.

The data comes from a study published by the National Bureau of Economic Research by Alberto Cavallo, an associate professor of applied economics at MIT’s Sloan School of Management. After selecting a list of 56 retailers in 10 countries that sell both online and in physical stores, Cavallo tasked a bot with indexing the electronic prices of 24,000 products in total, while simultaneously hiring assistants off of crowdfunding platforms to go into relevant store fronts and scan corresponding prices from barcodes right off shelves.

In total, Cavallo collected 38,000 pricing observations, a tremendous amount of work to reach a conclusion of no small anticlimax: On the whole, the channel that products are listed on affects price very little at all.

On average, 72 percent of cross-channel prices were identical, though there were some variations according to regions. U.S. omnichannel retailers priced slightly less consistently at 69 percent, while those in Canada and across the pond in the U.K. listed products at a nearly uniform 90 percent clip.

In fact, the decade-old trope that online retailers always have the best prices was only found to be true in one of the country’s studied — Japan — and even there, the “common sense” law of low-cost online sales only held 45 percent of the time, with an average 13 percent discount applied to those that did clock in under the equivalent number.

While Cavallo told Marketing Dailythat he undertook the study as a means of validating pricing data accuracy for use in constructing more detailed indexes, the findings also indicate that major retailers in the omnichannel space are starting to even out their rudders as far as cross-channel pricing is concerned. Even if consumers aren’t occupied with chasing deals, they can also rest easy knowing that the likelihood of them getting a raw deal thanks to dynamic pricing engines and a bit of bad timing seems to be decreasing.

If it is decreasing, though, it’s not doing so steadily. PYMNTS.com’s OmniReadi Index, powered by Vantiv, found that the percentage of omnichannel merchants who offer consistent price matching both online and in store has fluctuated dramatically over the past year. As of June 2015, 15 percent of retailers could be counted in their ranks, but a few short months later in Sept. 2015, their numbers had fallen to just 12 percent overall. At the close of the year, the share of price-matching retailers had ballooned to 26 percent.

While painting different pictures of just how prepared for consistent omnicommerce retailers truly are, both Cavallo’s findings and the OmniReadi Index both show that merchants are heading solidly in the direction of transparent, uniform pricing, no matter where consumers choose to shop. From the consumer advocate’s perspective, this can’t be anything but a good thing.

Retailers might have a different take on things, though. As consumers become more accustomed to low prices everywhere they look instead of strictly online, merchants with little to no physical footprint won’t be able to lean on the crutch of the best deal in town. And if the goal is to stay relevant to consumers whenever the urge to buy strikes them, it could be time to to fine-tune previously neglected brick-and-mortar footprints or risk becoming an unfortunate statistic in the next retail study.